NORWAY: Solid Q3 RNS; Next Week Decision Hinges On Assessment of Inflation

The Q3 Regional Network Survey was solid overall, perhaps a touch hawkish on the margin. We think next week’s Norges Bank decision will hinge decisively on how the Committee views the August inflation report, which was stronger-than-expected after considering a policy change in Child daycare prices. There hasn’t been a material reaction in NOK FX/rates to the report, suggesting markets are happy with current pricing that still leans in favour of a 25bp cut next week.  

Inflation/slack: Overall, fairly steady developments relative to Q2. 

• Wage growth expectations were steady at 4.5% Y/Y in 2025 and 4.0% in 2026. Broadly in line with Norges Bank June MPR (4.5% in 2025 and 4.1% in 2026).
• Capacity Utilisation: The share of contacts that will have problems accommodating a rise in demand was steady at 35%. However, the share of those citing shortage of labour as a constraint on output ticked up to 25% (vs 23% in Q2). The latter is somewhat surprising given the sharp rise in (caveated) LFS implied participation rates and fall in vacancy rates in recent months. 

Output/Activity: Steady, positive signals. We don’t think the rise in investment intentions should be considered too hawkish, as these estimates can be volatile. 

• Q3 and Q4 output seen at 0.4% Q/Q. Norges Bank projected Q3 mainland GDP at 0.4% Q/Q in the June MPR, but may revise up its outlook in the September MPR following solid outturns in Q1 and Q2.
  • Largest increases in expectations relative to the prior survey came from construction and oil services. In the latter category, better expectations amongst domestic oil services firms were offset a little by worse expectations amongst export-oriented firms.
• Q3 and Q4 employment seen at 0.2% Q/Q, little changed from the previous survey.
• Q3 investment expectations seen at 1.1% Y/Y in 2025 and 0.1% in 2026, solid upward revisions relative to the June survey. This year’s rise was driven by manufacturing (5.0% vs 0.5% prior) and oil services (0.5% vs -5.0% prior), while 2026 was driven by oil services (0.0% vs -1.5% prior) and other services (2.5% vs 0.5% prior)
• Profitability expectations were revised up to 5.9% Y/Y (vs 4.2% prior)